Yesterday’s passage in parliament of the Ministry of Environment and Energy’s omnibus bill marks the start of the countdown to the transfer to DEPA of the state’s 34% stake in DESFA, as well as to plans to strengthen the company further through the possible entry of a major minority investor.
The fact that the company will once again have a presence in the national gas network and infrastructure (pipelines, Revithoussa, etc.) - it lost that presence around 20 years ago, when its gas transmission business was spun off in 2007 under the directive to liberalise the market - not only strengthens it, gives it greater scope to pursue international partnerships and ultimately reinforces the country’s position on the energy map. It also gives it an even more attractive business story, capable of attracting strong investor interest, with all that implies for the possibility of seeking a major investor again or listing a stake on the stock exchange from the 100% currently controlled by the state.
The transfer of the state’s 34% stake in DESFA to another company that must also be wholly state-owned (namely DEPA) brings closer the prospect of selling a stake in DEPA, either through a listing or partial privatisation, with the state retaining a majority stake in every scenario.
The government’s position has long been clear and can be summed up as follows: a stronger DEPA under state control is useful for citizens, the country’s energy policy and its diplomacy.
This does not rule out the view that “it is not the state’s job to own 100% of energy companies”, nor the reports that discussions at the Hellenic Corporation of Assets and Participations on the company’s future will soon get under way, including whether to list a stake on the stock exchange or seek a minority partner.
The issue was also raised two years ago, when the state took ownership of 100% of the company’s shares after the 35% stake in DEPA Commercial held until then by Helleniq Energy was sold to TAIPED (which was subsequently absorbed by the Hellenic Corporation of Assets and Participations).
The next three months and the state’s role
As for the transfer itself of the 34% stake in DESFA to DEPA, provided there are no complications, completion is expected to take 2-3 months, according to officials familiar with the matter.
If all goes well, the process will be completed early next year, taking into account the time needed to value the 35% stake, the mandatory consent of RAAEY, and any intervention by DG Comp, provided no new certification is required.
A key factor in the success of the plan is that the shareholder rights and voting rights arising from the 34% stake will continue to be exercised by the Minister of Environment and Energy, as stipulated in Article 53 of the ministry’s law.
In other words, the state retains the role of a passive shareholder, as it has no rights under the shareholders’ agreement and therefore cannot influence any decision by DEPA’s board or general meeting.
In any case, under the provision that has now become law, "...the administrative and shareholder rights arising from the aforementioned shares, including voting rights at general meetings, the right to participate in management and appoint members to management, as well as special information rights...", will continue to be exercised exclusively and at the sole discretion of the Minister of Environment and Energy.
In effect, the provision seeks to counter the argument that this change could allow DEPA to influence third parties’ access to DESFA’s gas infrastructure or give it access to sensitive information.
According to people familiar with the matter, during lengthy discussions that began before last summer, the provision was included also as an assurance to the Senfluga consortium, which owns 66% of DESFA and in which Italy’s SNAM plays a central role, that in substance nothing is changing. Just as the minister exercises the shareholder and voting rights attached to the 34% stake today, the same will continue to apply when the stake passes to DEPA.
EU law and the return of the 34% stake
That is why, people familiar with the case say, the transfer does not appear to raise regulatory or compliance concerns, and they expect no conflict with the EU rules on ownership unbundling between gas trading and networks. This is because the provision requires the state’s rights to be exercised in a way that preserves ownership unbundling and the operator’s independence, and because the legislative framework remains the same as when DEPA owned DESFA.
Though only long-time observers may remember, DESFA was spun off from DEPA back in 2007. It was created by separating DEPA’s natural gas transmission business and remained wholly owned by DEPA until 2010. The aim at the time was to fully separate monopoly infrastructure and transmission activities from the competitive activities of natural gas supply and trading.
Full ownership unbundling was completed in 2018, and in December of that year the 66% stake in DESFA was transferred to the Senfluga consortium (Snam, Enagás, Fluxys) for €535 million, a price that would clearly have been much higher had Greece not been under bailout memoranda.
In the 2018 spin-off, DEPA was separated from high-value assets (pipelines, Revithoussa and transmission infrastructure), as well as the related annual dividends, without any compensation or offsetting payment, while also paying the corresponding tax at the time. All proceeds from the privatisation went to the state and Hellenic Petroleum.
That is why, government sources say, the return of the 34% stake, beyond any plans for DEPA’s future, also represents a partial restoration of its asset base.